Displaying items by tag: bubble

Wednesday, 24 January 2018 11:32

SEC Cracking Down on Blockchain

(Washington)

The whole market seems to have become punch-drunk with blockchain fever. The recent cases of small companies seeing their share prices surge on the back of adding “blockchain” to their name has been well documented. Now the SEC is cracking down. Jay Clayton, chairman of the SEC had this to say on the issue, amidst an even larger statement shaming the rebranding practice: “The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed-ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering.”


FINSUM: The final straw seemed to be when a publicly traded company that specializes in Long Island ice teas changed its name to Long Blockchain and saw its shares skyrocket.

Published in Eq: Tech

(New York)


Some analysts are growing increasingly wary of the real estate market as valuations continue to rise higher. Now, more fringe signs that the market might be getting toppy. A new practice is being favored by Wall Street that looks like a sign of froth—so-called “drive-by” valuations. The practice involves local real estate agents driving by properties to do valuations at glance. Much cheaper than traditional appraisals, they were outlawed for use in regular mortgages after the crisis. However, at the institutional buying level, they are still allowed and thriving. The Wall Street Journal sums up the scale and shoddiness of the practice best, saying “Now these perfunctory valuations abound, underpinning tens of billions of dollars of home deals. Sometimes the process is outsourced to India, where companies charge real-estate agents a few dollars to come up with U.S. home values by consulting Google Earth and real-estate websites”.


FINSUM: This is an absolutely terrible idea, and is exactly the kind of pooling practice that leads to dangerous buildups. Foreign companies doing US home valuations with Google Earth? Sounds like a recipe for disaster.

Published in Macro
Thursday, 18 January 2018 11:40

PIMCO Warns of Big Market Fall

(Los Angeles)

PIMCO says there is one really big thing to fear in markets above all else—the lack of fear. The current “melt up” is symptomatic of extreme investor confidence, and that is cause for grave concern, says PIMCO, one of the world’s largest money managers. According to PIMCO, “The fact that the fear is gone is the main reason why we should be worried”, continuing “That means most investors are now pretty fully invested and that means they will want to get out if the markets start to correct -- exacerbating the downdraft”.


FINSUM: We think PIMCO has a great point. The market’s start to this year is pretty insane—it is on track to triple in value in 2018. Is this the final run before a big downturn?

Published in Macro
Thursday, 18 January 2018 11:33

The Bitcoin Burst is Officially Here

(New York)

A few weeks ago bitcoin was trading at over $20,000 on some exchanges. No it is trading below $9,500. Critics of the cryptocurrency are taking the big fall as vindication of their view, while others are sticking to bitcoin. Other cryptocurrencies slid big too, with ethereum and litecoin both falling around 30%. “The crypto craze is morphing into a crypto crash, from Bitcoin mania to Bitcoin bust”, says a trading analyst, continuing that “that there is no level at which value players step in” when a bubble is bursting.


FINSUM: One of the big problems with bitcoin, as opposed to say the cotton bubbles of American history, is that there is no fundamental underlying economic value of the currency, so there is no potential bottom other than zero.

Published in Eq: Tech
Wednesday, 17 January 2018 10:53

The Bitcoin Bubble is Bursting

(New York)

The end of the exciting but short-lived Bitcoin era may be upon us. As everyone will know, the cryptocurrency surged this year by around 2000%, from $1,000 up to $20,000. However, after worries and threats of regulation, bitcoin has fallen back steeply and is now trading at around $10,000 or just half what it was a few weeks ago. One prominent fund manager commented on bitcoin that “Having no clear fundamental value and largely unregulated markets, coupled with a storyline conducive to delusions of grandeur, makes this more than anything we can find in the history books the very essence of a bubble”.


FINSUM: It is next to impossible to forecast what bitcoin will do, but it should be noted that the cryptocurrency has bounced back from 50% drops before in this big rally.

Published in Eq: Tech
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